Sysco would sell 11 Foods centers to win deal approval

(Reuters) - Food distributor Sysco Corp (SYY.N) said it would sell 11 distribution centers run by takeover target US Foods Inc [USFOO.UL] to far smaller rival Performance Food Group if skeptical antitrust regulators approve the merger with US Foods.

A US. Foods truck is shown on delivery in San Diego, California October 23, 2013. REUTERS/Mike Blake

Sysco’s $3.5 billion offer for US Foods has been pending approval from the Federal Trade Commission for over a year but is viewed as problematic given the dominance of both companies as suppliers to hospitals, hotel chains and restaurants.

Reuters reported on Friday that Sysco and US Foods had offered to sell 11 centers to win over the FTC.

Sysco, the largest U.S. food distribution company, and US Foods, which is No. 2, are the only companies with the reach to offer nationwide contracts for a broad range of foods, paper products and cleaning supplies.

In extensive talks with the FTC, Sysco said it has argued the deal would benefit customers.

“Unfortunately, the FTC has taken a different view of the potential competitive impacts of the merger,” Sysco Chief Executive Bill DeLaney said in a statement. “We believe this divestiture package fully addresses its concerns.”

Company executives and the five FTC commissioners are to meet this week and next to discuss Sysco’s divestiture offer.

“If there’s one thing that the FTC and we do agree on is that it’s time to move this process forward,” Delaney said in a conference call with industry analysts.

The distribution centers offered to Performance Group generated $4.6 billion in revenue in US Foods’ latest fiscal year, Sysco said.

The facilities include three in California - Corona, San Francisco and San Diego - as well as centers in Denver, Kansas City, Kansas, Phoenix, Salt Lake City, Seattle, Cleveland, Las Vegas and Minneapolis.

Performance Food Group is owned by investment firm Blackstone Group LP (BX.N).